Tag Archives: Lawrence Summers

A Tale of Two Presidents

22 Wednesday Sep 2010

Posted by in economy, Obama, Politics, Wall Street

≈ Leave a comment

Tags

, , , , , ,

There’s good news and there’s bad news. First, the good:

“White House officials expect Lawrence Summers to leave his job as the president’s National Economic Council director after November’s congressional elections, according to three people familiar with the matter.”

Now the bad:

“Administration officials are weighing whether to put a prominent corporate executive in the NEC director’s job to counter criticism that the administration is anti-business, one person familiar with White House discussions said. White House aides are also eager to name a woman to serve in a high-level position, two people said. They also are concerned about finding someone with Summers’ experience and stature, one person said.”

A “prominent corporate executive?” To “counter criticism that the administration is anti-business?” A tale of two presidents. President Franklin Roosevelt:

“We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering….Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.”

President Barack Obama: ‘If I give them this maybe they’ll stop saying mean things about me.’

Let’s see, a prominent corporate executive with Summers’ experience and stature who’s a woman. Just convince Bob Rubin to have a sex change and you’re there.

Rubin May Testify Before Financial Crisis Commission

27 Saturday Feb 2010

Posted by in economy, Financial Crisis, Obama, Politics, Wall Street

≈ Leave a comment

Tags

, , , , , ,

One of the architects of the financial meltdown, and the Godfather of the Obama economic team, might have some ‘splainin’ to do. From Bloomberg:

“Robert Rubin, the former U.S. Treasury secretary who later advised Citigroup Inc. as the bank piled up subprime-mortgage losses, may soon face his first public grilling on the 2008 financial crisis.

The Financial Crisis Inquiry Commission investigating the worst economic slump since the Great Depression, plans to ask Rubin to testify in April, said two people with knowledge of the commission’s decisions.

Ask? How about subpoena?

“Rubin’s reputation dimmed  after the U.S. bailed out New York-based Citigroup with $45 billion and AIG had to be propped up because of losses on derivatives. When Rubin was President Bill Clinton’s Treasury secretary, he fought efforts to regulate derivatives.”

His reputation dimmed? Barack Obama didn’t get that memo:

“[Obama] named Rubin to be an economic adviser during the 2008 presidential campaign, and two Treasury protégés, Lawrence Summers and Timothy Geithner are top officials in the White House. Summers, 55, is chief economic adviser and Geithner, 48, is Treasury secretary.”

And that’s not all:

“Just below Summers is Jason Furman, who worked for Rubin in the Clinton White House and was one of the first directors of Rubin’s Hamilton Project.

And as head of the powerful Office of Management and Budget, Obama named Peter Orszag, who served as the first director of Rubin’s Hamilton Project.”

…to serve alongside Furman at the NEC [Obama hired] management consultant Diana Farrell, who worked under Rubin at Goldman Sachs. In 2003, Farrell was the author of an infamous paper in which she argued that sending American jobs overseas might be “as beneficial to the U.S. as to the destination country, probably more so.”

…Over at the Commodity Futures Trading Commission, which is supposed to regulate derivatives trading, Obama appointed Gary Gensler, a former Goldman banker who worked under Rubin in the Clinton White House. Gensler had been instrumental in helping to pass the infamous Commodity Futures Modernization Act of 2000, which prevented regulation of derivative instruments like CDOs and credit-default swaps that played such a big role in cratering the economy last year.

Paul Krugman: “What Do You Mean We”?

01 Monday Dec 2008

Posted by in Election 2008, Obama, Politics, Uncategorized

≈ Leave a comment

Tags

, , , , ,

With all due respect to Timothy Geithner, Lawrence Summers, and the rest of President-elect Obama’s economic team, there is one name I would like to have seen included on that list–that of Nobel prize winning economist Paul Krugman.

Here’s why. From a Krugman op-ed piece in the New York Times recently:

“A few months ago I found myself at a meeting of economists and finance officials, discussing — what else? — the crisis. There was a lot of soul-searching going on. One senior policy maker asked, “Why didn’t we see this coming?”

There was, of course, only one thing to say in reply, so I said it: “What do you mean ‘we,’ white man?”

Seriously, though, the official had a point. Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage. Yet these precedents were ignored. And the story of how “we” failed to see this coming has a clear policy implication — namely, that financial market reform should be pressed quickly, that it shouldn’t wait until the crisis is resolved.

About those precedents: Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories?

Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world?

Why did almost everyone believe in the omnipotence of the Federal Reserve when its counterpart, the Bank of Japan, spent a decade trying and failing to jump-start a stalled economy?

One answer to these questions is that nobody likes a party pooper. While the housing bubble was still inflating, lenders were making lots of money issuing mortgages to anyone who walked in the door; investment banks were making even more money repackaging those mortgages into shiny new securities; and money managers who booked big paper profits by buying those securities with borrowed funds looked like geniuses, and were paid accordingly. Who wanted to hear from dismal economists warning that the whole thing was, in effect, a giant Ponzi scheme?”

Put more succinctly by Upton Sinclair:

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

Mr. Krugman’s conclusion, and one I hope is heeded by the Obama administration, is that now is the time not only to focus on the short-term crisis, but to make the long-term fixes that will prevent the next one from occurring.